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Will the New Year see a resumption of collective bargaining in China?

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5 January, 2010

In December 2009, a magazine article exposed the extent to which labour relations in China had deteriorated over the last year, with enterprises deliberately taking advantage of the government’s leniency during the global financial crisis to exploit their workforce. The writer called on the government and trade unions to take concerted measures, including the introduction of collective bargaining, to alleviate the growing conflict between workers and management.

The most interesting thing about the article however was not so much what it said but the fact that it was published in Liaowang (瞭望), the magazine of the official Xinhua News Agency, which is widely read by senior government officials and policy makers.

It seems that many policy advisors are now realizing that, as the Chinese economy recovers, there is an increasingly urgent need to restore the rights of workers that were systematically stripped away by government officials seeking to protect local enterprises during the financial crisis. The scholars and officials interviewed by Liaowang all agreed that enterprises had got away with too much, and that unless some balance was restored to labour relations, the conflict would only increase.

For example, the director of the All-China Federation of Trade Unions’ Collective Contracts Department, Zhang Jianguo, was quoted as saying, “In mitigating labour disputes, the fundamental issue is to establish a collective bargaining system that would allow labour disputes to be managed and resolved within the enterprise. From this point of view, collective bargaining is the route we must take in defusing conflict and developing harmonious labour relations.”

Presciently, one year earlier, at the height of the financial crisis, CLB Director Han Dongfang noted: “The long-term trend is clear. The only way the government can prevent greater social conflict is by giving more power to the workers not less. If workers have the right to negotiate as equals with the boss the chances of disputes turning violent will be greatly reduced. If on the other hand, the government ignores workers’ rights and gives the boss free rein, the consequences will be very serious.”

The Liaowang article, "Grasp the opportunity to reevaluate labour relations, eliminate potential problems, and reformulate policy," acknowledges many of the problems and trends that CLB, and many others, have reported on over the last year, and such as could signal a long overdue change in government policy. The 4,400 word article is translated in full below. Given that it is an official Party and government publication, the language is rather vague and turgid in places but we have endeavored to make it as readable in English as possible. The Chinese original (抓住重新审视劳资格局, 消除劳资矛盾隐患, 调整劳工政策的机会) is available here.

When the ACFTU conducted a study in July 2009, we told them that it usually takes three months for labour dispute cases to be heard, far longer than the 45-day limit for rulings, as stipulated in the Labour Dispute Mediation and Arbitration Law. Who would have thought that by October, new cases would not be heard until August 2010? For workers, this is extremely unfavorable!

We understand very well: it’s not that the labour dispute arbitration committees are not working hard, it’s that the number of labour disputes cases has exploded.

Shi Fumao, a dynamic public interest lawyer on the frontline of labour relations, is keenly sensitized to the growing number of labour disputes in China. In an in-depth interview with Liaowang, Shi explained that towards the end of 2009, there was a sharp increase in the number of collective labour disputes (群体性劳动争议) involving more than 20 people. “Originally we might get one or two collective labour dispute cases per month, but recently we’ve been getting these sorts of cases every day.”

In the third quarter, the number of cases accepted by labour dispute arbitration committees (LDAC) across the county reached 519,000. Experts have recognized that this is “operating at a high level.”

According to the Ministry of Human Resources and Social Security (MOHRSS), the number of cases accepted by LDACs has more than doubled, from 314,000 in 2005 to 690,000 in 2008.

According to the Supreme People’s Court, the civil courts accepted 280,000 labour dispute cases in 2008, up 93.93 percent over the previous year. In the first half of 2009, 170,000 cases were accepted, up over 30 percent. Some areas saw even greater increases. In the first quarter of this year, Guangdong, Jiangsu and Zhejiang saw increases of 41.63 percent, 50.32 percent and 159.61 percent, respectively.

At the same time, mass incidents stemming from labour disputes dramatically increased and took more violent form, raising public awareness of the issues. Many experts and academics interviewed for this article agreed on this point, and added that labour disputes had now become a major source of conflict in Chinese society.

The “radicalization” of industrial worker responses

In 2009, a number of industrial workers were particularly active in staging mass protests. In April, over one thousand workers at a cotton factory in Baoding, Hebei, organized a “march on the capital” along a national highway; in July, workers from a Wuhan boiler factory staged three road blockades; also in July, the Tonghua incident ended with a “double loss” − seven of the steel mill’s furnaces were shut down and a senior enterprise manager was beaten to death, shocking the country; in August during the Lingang steel mill incident, a State-owned Assets Supervision and Administration Commission vice-director was held captive for 90 hours; and in November, Chongqing Jialing machinery workers went on strike.

“Labour disputes leading to mass incidents are one of this year’s striking features,” said Shan Guangnai, an expert on mass incidents at the Chinese Academy of Social Sciences. “In these incidents, we can see the strength of industrial workers in particular. We need to closely follow these trends in labour relations in large and modernized industrial areas.”

In the opinion of the experts interviewed for this article, when compared with the outbreak of mass incidents at the end of the 1990s, the situation in 2009 is perhaps not that bad. However, this observation is premised by the fact that 2009 did not have a large number of lay-offs and redundancies from state-owned enterprises (SOEs).

“The restructuring of SOEs has been going on for many years, and workers, through the experiences of their fathers and brothers being laid-off, receiving compensation, re-employment, insurance and medical care, now understand the original model of restructuring,” Shan Guangnai said.

Zhang Jianguo, the director of the ACFTU’s Collective Contracts Department, told Liaowang that in the process of SOE restructuring, some local officials, departments, and enterprises ignored employees’ democratic rights, declared bankruptcy without proper authorization, and sold off assets directly linked to enterprise survival, disregarded the fate of the employees, and national interests, and in some cases, sold off national assets at below market price. The restructuring plans at some enterprises were not thorough or detailed enough to meet legal requirements. As a result, government policies on enterprise restructuring could not be implemented, and the rights and interests of the workers were harmed.

Zhang Jianguo thinks that the main characteristics of some of the mass incidents caused by SOE restructuring were: having a clearly disadvantaged group with a strong desire to pursue its interests, the surfacing of social conflict, and the gap between laws and regulations and social reality. “Moreover, in contrast with the relatively diffused nature of the workers’ protests at small and medium-sized enterprises, workers at large enterprises are fairly concentrated and highly organized.”

Shan Guangnai concurred. “In the Tonghua, and Lingang incidents, we could see that the workers’ indignation and actions were consistent with each other. Such unity of thought and action is intimately bound up with the industrial workers mode of production.”

Most large-scale enterprises have a hierarchical structure comprising shift groups, workshops, branch plants, and headquarters. This sort of structure creates discipline among industrial workers, and brings out their organizational “resource superiority.” Shan Guangnai explained, “In a shift group, everybody’s salaries and benefits are the same; in a workshop, everybody’s conditions are the same, and in a branch plant, everybody has to face the same conditions. This creates a group with common interests that has a strong sense of community and is relatively powerful – thus the workers’ power to mobilize is relatively strong and they can take action fairy easily.”

In the old industrial regions of China’s northeast, this sort of trend is even more apparent. In some places, a whole town revolves around one large SOE, like in Tonghua’s Erdaojiang district. When geographic space, the mode of production and workers’ interests are linked, it produces an intense feeling of shared collective identity.

The “planning power” (策划力) in these types of mass incidents has obviously increased. “Compared to the Weng’ an Incident in which protest signs were made of torn pieces of cloth, this year we saw signs that were professionally printed, which illustrated that they had prepared in advance, and were highly organized,” Shan Guangnai said.

“Labour conflicts that have been building up for many years, combined with new conflicts and problems brought about by SOE restructuring, are currently changing workers’ thinking. Some local Party and government officials however lack understanding and an accurate grasp of workers’ thinking, and this leads to an intensification of problems, with disastrous results,” Zhang Jianguo said.

Mass incidents stemming from labour disputes have reached new highs

Many experts interviewed for this report pointed out that labour relations are a complex and integral part of society, touching on economic, social, and stability-related issues.

However, some local governments take “administrative competence” to simply mean the ability to ensure economic growth, and thus, to be in an advantageous position, they primarily think about attracting capital, and overlook related social policies and the protection of workers’ rights. Behind every glittering economic statistic, the unharmonious phenomenon of some local governments infringing on workers’ legal rights can be seen, and this has led to the erosion of labour relations.

“The frequency of labour-related mass incidents is intensifying, their scale is increasing, and indeed they have already reached new highs in both scale and frequency,” said Zhang Jianguo.

According to Shandong Federation of Trade Union statistics, in just the first quarter of 2009, the province recorded 52 “regular mass incidents” (一般群体性事件), the main causes of which were wages arrears, economic compensation, and long unresolved issues. According to the Shenzhen police, labour disputes were the most rapidly increasing category of mass incidents and “potentially destabilizing” (不安定因素苗头) incidents in the city. There were 637 incidents in 2008, a rise of 119.7 percent from the previous year; and in January of 2009 there were 97 incidents, a rise of 61.7 percent from the previous period.

The government and ACFTU report entitled Under the background of the financial crisis, a survey of enterprise-labour relations and workers rights situation showed that 50.4 percent of the enterprise union chairs interviewed either “agreed with” or were “uncertain” about the statement, “the upcoming year will be an explosive period in collective labour disputes.” While 55 percent of union chairs either agreed with or were uncertain about the statement “in the upcoming year mass incidents could show a clear increase.” From this we can see that over half the union chairs expressed concern over the prospects for 2010.

Zhang Jianguo noted that enterprise unions are on the frontline of labour relations and therefore are in the best position to vividly and directly understand conflicts. The fact that so many enterprise union chairs expressed concern about the trends in labour relations should alert Party and government officials to the seriousness of the problem.

Moreover, the antagonism and violence in this year’s labour-related mass incidents was striking. In some cases, young working men and women, united hand-in-hand, staged road blocks and silent, peaceful sit-ins in front of government buildings. Some incidents however turned violent causing injury to workers and police and damage to property. There were even kidnappings and violent beatings in the Tonghua and Lingang incidents. The experts interviewed openly acknowledged the violent tendencies apparent in labour relations nowadays.

Neglecting migrant workers rights

Labour disputes in 2009 took place against the all-encompassing background of the international financial crisis. The State Council’s economic stimulus plan, unveiled in November 2008 to boost domestic consumption and increase economic growth, led to the Chinese economy rebounding in the third quarter of 2009, and by October there was little doubt that the goal to “protect eight percent growth” could be realized. Experts, however, were not so optimistic about the financial crisis’ impact on labour relations.

Su Hainan, director of the MOHRSS Labour Research Institute and author of Under the background of the financial crisis, a survey of enterprise-labour relations and workers rights situation, told Liaowang that the financial crisis had led to a sharp drop in foreign demand, causing problems for some foreign export-oriented enterprises, small and medium-sized enterprises, and labour-intensive industries. Privately-owned companies in particular, sought to get out of trouble by continually adjusting their modes of operation, labour management systems and structures, leading to conflict with labour.

“We’ve never experienced a situation in which so many enterprises, almost all at the same time, and on such a large scale, started to undergo adjustments – some had no alternative, while others took advantage of the situation to evade the law,” Su said.

Firstly, these adjustments affected both individual factories and the national structure of employment. The most obvious example of this was the “tide of migrant workers going back to the countryside” that was seen at the end of 2008 and early 2009. Sample surveys by the National Bureau of Statistics showed that right before the 2009 Spring Festival, an estimated 70 million migrant workers returned home, some 50 percent of the migrant worker workforce.

Grassroots rural society found it very hard to cope with such a heavy burden. During an investigation of the Shishou Incident on 21 June 2009, Shan Guangnai said, “we discovered that the youngsters in the streets were all returned migrant workers. Some of them hadn’t received an adequate salary, and they were very emotional – this was a destabilizing factor.”

Second, some enterprises changed working hours and rest schedules. In his survey, Su Hainan found that 40 percent of enterprises were not paying workers during rest or vacation days. “The actual percentage may be a bit higher,” he said.

Some enterprises, due to a lack of orders, changed the regular working hour system into a “total calculation based on work time” (综合计算工时制) in which time worked on rest days and public holidays was only paid at the normal rate. In the process of these and other adjustments, many enterprises didn’t inform the Labour Department, nor did they negotiate with workers.

According to the National Bureau of Statistics’ sample survey, in the first half of 2009 the rise in workers salaries was 5.1 percent lower than in the previous year – the lowest level increase since 2001. According to Su Hainan’s survey, in the second half of 2008 and first half of 2009, the salaries of many workers at export-oriented small and medium-sized enterprises dropped by 20 to 30 percent.

The National Bureau of Statistics reported that 5.8 percent (4.06 million) of the migrant workers who went back to the countryside in 2009 were owed wages in arrears. In the Pearl River Delta the situation was particularly bad. In Shandong, Guangdong, Fujian and other coastal provinces, there were many instances of Korean, Hong Kong, and Taiwanese enterprise owners skipping town without paying wages. “The number of workers who were affected by foreign enterprise bosses owing wages and skipping town, and the amount of money owed, was probably more than double in previous years,” Su Hainan said.

Fourth, working conditions deteriorated. In July 2009, Henan migrant worker Zhang Haichao’s extreme method of defending his rights – volunteering for open chest surgery to demonstrate his work-related lung disease - exposed the dark side of China’s occupational illness prevention and safety record.

“The financial crisis comes, orders drop, and companies no longer have the money to carry out planned improvements to working conditions. So they wait till the economy starts to recover, and enterprises start to add overtime, production picks up, and this exacerbates already problematic safety conditions,” Zhang Jianguo said. “Through all the optimistic data, we can see substantial problems that have been glossed over, especially in terms of protection of the rights and interests of the 150 million migrant workers. If China didn’t have migrant workers to act as a “reservoir” then the hit from the financial crisis in aggravating labour problems would be even more severe.”

“Emergency medicine” or “ordinary medicine”

As the economy gradually gets better, more and more people are starting to see that the financial crisis did nothing more than provide the spark that aggravated the deep-layered, long-accumulating structural problems between capital and labour. Many experts stressed that in order to promote long-term social stability, harmony, and development in China, before the after-effects of the financial crisis have been completely quieted, we should push aside the smokescreen of the financial crisis, and grasp the opportunity to reevaluate labour relations, eliminate potential problems, and reformulate policy.

“The labour conflicts of 2009 had another cause, namely the collision of new labour legislation and the economic crisis,” said Qiao Jian, director of the labour relations department at the China Institute of Labour Relations. Qiao, who has attended over five conferences related to the international financial crisis and its impact on labour relations, told Liaowang, “The experience of the past year shows us that we should re-consider the operating and administrative models for labour relations as economic growth increases”.

Qiao Jian was referring to the Employment Promotion Law, the Labour Dispute Mediation and Arbitration Law, and the Labour Contract Law. “Especially the Labour Contract Law, in early 2008, it met with opposition mainly from economists and employers. But after the financial crisis hit, it was local governments who opposed it.

“In some places, the financial crisis was used as an excuse not to strictly enforce the Labour Contract Law. In particular, small and medium-sized enterprises took a “wait and see” attitude in their implementation of the Labour Contract Law. The central government strictly enforces laws, but some local governments take a laissez faire attitude towards enterprises that disobey rules and regulations and damage workers interests,” Zhang Jianguo said.

In the provinces around the Pearl River and Yangtze River Deltas, some local governments introduced policies to counteract the Labour Contract Law and Labour Dispute Mediation and Arbitration Law. “As far as enforcement is concerned, these two laws have entered a state of paralysis in certain areas,” Qiao Jian said.

“Without doubt, there have been some enterprises that have used the financial crisis as an excuse to lay off people and not sign labour contracts. We can’t rule out some local areas not necessarily understanding the new labour legislation, but some felt conflicted from the start, and took advantage of this opportunity,” Su Hainan said. “In extraordinary times, extraordinary methods will be used, but that doesn’t mean that the new labour laws should be weakened or put aside. Correctly handling workers’ short-term and long-term interests, a healthy dialogue between labour and capital, and respecting the new labour laws, should be the premise and starting point for both formulating and implementing laws and regulations.”

That China uses extraordinary measures in extraordinary times is common knowledge. On 17 November 2008, the MOHRSS announced a temporary freeze on the minimum wage; in December, MOHRSS and three other ministries jointly put out a circular, calling for “The Five Deferrals, Four Reductions, Three Subsidizes and Two Negotiates.” And some local governments introduced a “Three Flexible” system: flexible use of workers, flexible work hours, and flexible salaries.

“This was a response to the slow down in economic growth, but as the economy recovers, such measures should be readjusted, for example, adjusting wages and the methods of calculation in the medium-term,” Qiao Jian said.

“The financial crisis has given us an opportunity to reexamine China’s labour policies,” Su Hainan said. “We should use two methods to cope with the cyclical changes in economic growth and in sectoral and enterprise diversity.”

First, after the economy recovers, we can consider appropriate adjustments to the minimum wage. The city government in Beijing, for example, has already formulated such a policy.

Second, a sound labour policy utilizes many approaches. “When things get better, the target and scope of the “Five Deferrals Four Reductions Three Subsidizes and Two Negotiates” and the “Three Flexibles” needs to be adjusted and changed,” Su Hainan said.

Concretely, the scope of these extraordinary measures should be reduced, and changed. Enterprises that still have difficulties can still use these policies, but on the condition that they don’t lay off employees and that they protect workers fundamental rights and interests, through consultations between employees and management. Other enterprises that are experiencing better times should stop implementation of these policies, and repay deferred social security contributions to the government.

Su Hainan drew an analogy: “In the context of the global economy, an economic crisis or enterprises encountering difficulties is a bit like someone getting the flu − it’s only a matter of time before you are infected. Therefore, flu medicine should be available for emergency use. This emergency medicine shouldn’t be cast aside. But it should only be available to those who get sick.”

“The financial crisis has divided domestic enterprises into certain categories, and we need to be clear about separating “sick people”, “weak people” and “strong men”, and by separating them we can adopt targeted measures. From there, the formulation and implementation of related laws and policies will fit more closely to China’s actual labour relations,” Su added.

Effectively opening the door to bargaining between labour and capital

Given the long-standing oversupply of labour in China, how can collective bargaining and equal consultation between labour and capital be achieved? Our experts agreed that although the difficulties are known to all, in a socialist China, it is the basic solution to reversing the abnormality of “strong capital, weak labour.” And as such, the attitude the Party and government is the key.

“From the macro perspective, the tripartite system of consultation (between employees, employers and government) gives us a lot of room to operate in,” Qiao Jian said.

In 1990, the Chinese government approved the International Labour Organization’s “Tripartite Consultation (International Labour Standards) Convention (ILO convention 144), which committed us to implementing a tripartite consultation mechanism. In 2001, the State Labour Relations Tripartite Consultation Conference (国家协调劳动关系三方会议) was formally set up. As of September 2008, over 12,000 tripartite consultation organizations had been set up nationwide from the many enterprises, unions, and local governments.

“The ILO’s tripartite mechanism has three basic functions− exchanging information, consultation, and negotiation. At this point we’ve not even done half of that. High-level consultation and bargaining have still not been put into play,” Qiao Jian told Liaowang. “We hope that the tripartite mechanism won’t just be an annual meeting, but rather that it can become a well formulated, real body with a permanent role to play.”

In order to combat the severe effects of the international financial crisis, on 23 January 2009, the State Labour Relations Tripartite Consultation Conference (SLRTCC) issued A Guiding Opinion on Dealing with the Current Economic Situation and Stabilizing Labour Relations, and on 27 February 2009, the ACFTU and the All-China Federation of Industry and Commerce jointly issued a Notice on Mobilizing Employees and Enterprises to Pull Together to Overcome Difficulties. We will have to wait and see whether or not any breakthroughs can be made in pushing for collective bargaining at the upcoming 14th meeting of the SLRTCC. (The meeting on 31 December did indeed confirm and recommend many of the points made in the Liaowang article. See 联手推进劳动关系和谐创建活动, 合力深化应对国际金融危机中的劳动关系协调工作).

On a medium-scale and at a micro level, the value of labour and management proactively initiating equal consultation and collective bargaining is increasingly apparent. “This is the fundamental solution to China’s labour conflicts,” Zhang Jianguo said.

“There are huge differences in China’s economic, regional and sectoral development. In this context, the effectiveness of government labour legislation in dealing with labour disputes is diminishing. At this time the government should encourage labour and management to resolve their conflicts through independent negotiations,” Qiao Jian believes.

“During some mass incidents, governmental departments expended a huge amount of effort, and were still unable to find a good solution. If you want to defuse and control labour disputes at their source, first you have to find a person who can engage in dialogue and bargaining. This, without doubt, requires a platform and a channel from within the system (体制内),” Shan Guangnai said.

“Signing collective contracts, pushing for a collective wage consultation system, requires construction of a platform within the system for negotiations; without this platform and without these negotiations, strikes, road blockades and other extra-legal protests may occur,” Zhang Jianguo said.

According to ACFTU statistics, as of 2008, a total of 1.9 million enterprises had signed collective contracts, covering 150 million workers, 89 percent of the workers in unionized enterprises. At the core of the collective contract system are wage demands, and this core content has been actively promoted in recent years. And yet it has been met with strong opposition due to the fact that employers are in an extremely strong position, and workers and enterprise unions are weak. We can clearly observe during negotiations at small and medium-sized enterprises the phenomenon of the union being “afraid to talk” or being “unable to talk,” and management being “unwilling to talk.”

In order to break this impasse, on 9 July 2009, the ACFTU formulated its Guiding Opinion Regarding Actively Launching Industrial Wage Collective Consultation Work. For concentrations of enterprises in the same industry, industry-wide union representatives will represent workers in collective consultations with similar level enterprise representative organizations with the aim of signing industry-wide collective contracts covering wage differentials, labour quotas, and the minimum wage. The goal will be to try to use industry-wide unions as the catalyst to push forward the collective consultation system.

In 2007, Premier Wen Jiabao, endorsed the Wenling woolen knitwear industry’s collective consultation system, saying it “can be summarized and popularized” (可以总结推广) across the country. Under the Wenling model, over the last six years, industry employee salaries have risen between five and 12 percent and labour disputes decreased by 70 percent.

In September 2009, when Liaowang interviewed Wenling industry union chair Chen Fuqing, the 59-year-old “regular employee” took out seven labour cost charts showing his seven years of experience and said, “The most important thing that I’ve learned is that industry-wide collective consultation ended the long history of the “boss says what the wages will be – and that’s final”. Now, local workers and migrant workers can both work with peace of mind knowing that they’ll get their money.”

“Giving the union more resources and methods, pushing for unions to be more independent of enterprises, and union officials being more independent of employers, is a necessary step in easing conflicts between labour and capital,” Qiao Jian said.

“Labour conflicts are not necessarily something to worry about. The key is for us to use scientific thinking in devising policies to deal with these problems,” said Zhang Jianguo, adding that, “In mitigating labour disputes, the fundamental issue is the need to establish a collective bargaining system that would allow labour disputes to be managed and resolved within the enterprise. From this point of view, collective bargaining is the route we must take in defusing conflict and developing harmonious labour relations.”